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Holding: Guaranty given by Chapter 11 debtors to secured creditor of debtor-husband's wholly- owned company was independent obligation that debtors owed to creditor, and therefore fact that guaranty was given as part of larger commercial loan transaction did not provide basis for allowing debtors' plan to modify creditor's claim under guaranty, which was secured by mortgage on debtors' residential real property, notwithstanding statute's bar on modification of rights of holder of claim secured only by security interest in real property serving as debtor's principal residence.
v. In re Terry, 505 B.R. 660 (Bankr. E.D. Pa. 2014).
Issue: Whether a debtor may exercise Pennsylvania state law redemption rights from tax sale purchaser by periodic payments under a plan.
Holding: Chapter 13 debtor who, prior to expiration of time for him to redeem real property sold at prepetition tax sale, filed a proposed plan wherein debtor sought to exercise his state law redemption rights, could exercise those rights by periodic payments over life of plan, and did not have to make lump sum payment of redemption amount prior to expiration of redemption period.
vi. In re Charles Street African Methodist Episcopal Church of Boston, 499 B.R. 66 (Bankr. D. Mass. 2013)
Issue: Chapter 11 debtor, a religious corporation that operated a local church in Massachusetts, sought confirmation of seventh modified first amended plan of reorganization. Secured creditor objected to confirmation and filed motion to dismiss case for cause.
Holdings: The Bankruptcy Court, Frank J. Bailey, J., held that:
(1) plan was not required to classify junior mortgagee's claim in the same class as general unsecured creditors;
(2) plan's failure to classify endowment's alleged unsecured claim for restoration of restricted-use funds that debtor had misapplied did not mandate denial of confirmation;
(3) the court had subject matter jurisdiction to approve a plan containing a third-party release; (4) the court had constitutional authority to adjudicate a plan containing a third-party release;
(5) In assessing the propriety of a Chapter 11 plan's proposed third-party release, a useful starting point for the court may be the Master Mortgage factors: whether there is identity of interest between debtor and third party, whether third party has contributed substantial assets to debtor's reorganization, whether injunction is essential to debtor's reorganization, whether substantial majority of creditors, and especially affected classes, agree to the release and have overwhelmingly voted to accept proposed plan treatment, and whether plan provides mechanism for payment of all, or substantially all, claims of class or classes affected by injunction. In this case, Chapter 11 plan's proposed third-party release, which involved release of secured creditor's rights under guaranty against ecclesiastical authority affiliated with debtor, a religious corporation that operated a local church in Massachusetts, was an impermissible means of
©2014 William L. Norton III
